Long-standing CVS Health Executive David Joyner succeeds Karen Lynch as CEO as company struggles to drive higher earnings and stock return, CVS was announced Friday.
The move, effective Thursday, a day before the announcement, comes as CVS shares have fallen nearly 20% this year. The stock was down about 11% in premarket trading on Friday.
CVS has faced challenges as higher medical costs weigh on its insurance unit, Aetna, and a retail pharmacy business squeezed by softer consumer spending and countervailing prescription drug reimbursements. In August, the company cut its full-year profit guidance for the third quarter in a row and said it would cut $2 billion in costs over the next few years.
In its release Friday, CVS also said it expects adjusted earnings of between $1.05 and $1.10 per share for the third quarter. It predicts higher medical costs than previously expected.
“In light of continued increased medical cost pressures in the Health Benefits segment, investors should no longer rely on the Company’s prior guidance provided on the second quarter 2024 earnings call on August 7, 2024,” CVS said in the statement.
The company is set to report third-quarter earnings on November 6.
Last month, CVS’s major shareholder Glenview Capital launched a major push for changes at the company, CNBC previously reported.
CNBC also reported last month that CVS’s board had hired strategic advisers to weigh its options, including the possibility of breaking up its insurance and retail businesses. However, CVS will now move forward intact, a company spokesperson told CNBC on Friday.
Joyner most recently oversaw the company’s pharmacy services as president of CVS’s chief pharmacy benefits officer, Caremark, a similar position that Lynch held before taking the top job in February 2021. She retired from CVS in 2019 before returning to the helm Caremark early last year.
“I returned to CVS Health in 2023 because I believed I could give more to the company, and I’m taking this opportunity today for the same reason,” Joyner said in a statement.
He began his career at Aetna in pharmacy benefit services and previously held the role of executive vice president of sales and marketing at CVS Health.
Joyner also had one term of about eight years to Caremark before it was acquired by CVS in 2007. Caremark is one of the nation’s three largest so-called PBMs, which are at the center of the U.S. drug supply chain. PBMs negotiate drug discounts with manufacturers on behalf of insurers, create lists of preferred drugs covered by health plans, and reimburse pharmacies for prescriptions.
“We believe that David and his deep understanding of our integrated business can help us more directly address the challenges facing our industry, more quickly drive the operational improvements our company requires, and fully realize the value that we can create unique,” said president Roger Farah. a statement.
Lynch also stepped down from the company’s board this week, the company announced Friday. Joyner will take a seat on the board and Farah will assume the role of executive chairman.
As CEO of CVS, Joyner will face increased scrutiny of Caremark and other PBMs from the Biden administration and lawmakers, which will likely continue regardless of which party holds the White House after the US election. The Federal Trade Commission last month sued Caremark and two other major PBMs, alleging they use practices that boost their profits while inflating insulin costs for patients.
It will also need to cover Medicare Advantage patients’ higher medical costs, which have risen in recent years for insurers as more seniors return to hospitals for procedures that were delayed during the Covid-19 pandemic. Medicare Advantage is a private health insurance plan contracted by Medicare.
The company hopes to meet its goal of a 100 to 200 basis point margin improvement in its Medicare Advantage business next year, CVS executives said in August.
Next month, CVS will report that medical costs were still up in the third quarter.
The company expects its insurance unit’s medical benefits ratio — a measure of total medical expenses paid relative to premiums collected — to be about 95.2 percent for the quarter, up from 85.7 percent in the prior period. A lower ratio usually indicates that a company collected more in premiums than it paid out in benefits, resulting in higher profitability.
— CNBC’s Sara Salinas and Rohan Goswami contributed to this report.